Nevius

Plaintiffs, owners of Read-Rite Corporation (“Read-Rite”) common stock between March 2, 1996, and June 19, 1996 (the “Class Period”), appeal the district court’s dismissal of their securities class action for failure to state a claim pursuant to the Private Securities Litigation Reform Act (“PSLRA”), 15 U.S.C. § 78u-4 (2002). Plaintiffs contend that the district court improperly concluded that they did not allege scienter with the particularity required by the PSLRA. We affirm.

I. BACKGROUND

Plaintiffs initiated their lawsuit against Read-Rite, its Chairman and CEO Cyril J. Yansouni, and Read-Rite COO and Director Frederic Schwettmann (collectively, “Defendants”). Read-Rite manufactured and sold ferrite metal-in-gap (“MIG”) recording heads and Tripad thin film inductive recording heads for hard-disk drives. In late 1994 and early 1995, Read-Rite reported growing revenues and profits.

By 1995, four customers purchased 90 percent of Read-Rite’s product. Western Digital represented 37 percent of Read-Rite’s sales, making it Read-Rite’s largest customer. Conner Peripherals (“Conner”) represented another 13 percent of Read-Rite’s sales. In late September 1995, Sea- *845…